Note 10 - Employee Benefit Plans

12 Months Ended

Sep. 28, 2013

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

(10) Employee Benefit Plans

Retirement plans. The Company has one defined benefit pension plan, the Insteel Wire Products Company Retirement Income Plan for Hourly Employees, Wilmington, Delaware (“the Delaware Plan”). The Delaware Plan provides benefits for eligible employees based primarily upon years of service and compensation levels. The Company’s funding policy is to contribute amounts at least equal to those required by law. The Delaware Plan was frozen effective September 30, 2008 whereby participants will no longer earn additional benefits. In February 2011, as part of the planned closure of the Wilmington, Delaware facility, the Company amended the Delaware Plan granting certain participants additional service credit. The amendment resulted in a one-time charge of $306,000 that was recorded during 2011 within restructuring charges on the consolidated statements of operations. The Company made contributions totaling $307,000, $206,000 and $477,000 to the Delaware Plan during 2013, 2012 and 2011, respectively, and expects to make contributions of $247,000 during 2014.

The reconciliation of the projected benefit obligation, plan assets, funded status of the plan and amounts recognized in the Company’s consolidated balance sheets for the Delaware Plan is as follows:

	Year Ended
(In thousands)	September 28, 2013			September 29, 2012			October 1, 2011
Change in benefit obligation:
Benefit obligation at beginning of year	$	3,181		$	3,231		$	4,280
Amendments		-			-			306
Interest cost		128			146			193
Actuarial (gain) loss		(134	)		218			69
Settlement		-			(218	)		(1,423	)
Distributions		(202	)		(196	)		(194	)
Benefit obligation at end of year	$	2,973		$	3,181		$	3,231
Change in plan assets:
Fair value of plan assets at beginning of year	$	1,739		$	1,660		$	3,017
Actual return on plan assets		201			287			10
Employer contributions		307			206			477
Settlement		-			(218	)		(1,651	)
Distributions		(202	)		(196	)		(193	)
Fair value of plan assets at end of year	$	2,045		$	1,739		$	1,660
Reconciliation of funded status to net amount recognized:
Funded status	$	(928	)	$	(1,442	)	$	(1,571	)
Net amount recognized	$	(928	)	$	(1,442	)	$	(1,571	)
Amounts recognized on the consolidated balance sheet:
Accrued benefit liability	$	(928	)	$	(1,442	)	$	(1,571	)
Accumulated other comprehensive loss (net of tax)		706			859			909
Net amount recognized	$	(222	)	$	(583	)	$	(662	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	1,138		$	1,386		$	1,466
Net amount recognized	$	1,138		$	1,386		$	1,466
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net gain	$	(192	)	$	(31	)	$	(206	)
Amortization of net loss		(56	)		(49	)		(304	)
Total recognized in other comprehensive income (loss)	$	(248	)	$	(80	)	$	(510	)

Net periodic pension cost for the Delaware Plan includes the following components:

	Year Ended
(In thousands)	September 28, 2013			September 29, 2012			October 1, 2011
Interest cost	$	128		$	146		$	193
Expected return on plan assets		(142	)		(134	)		(211	)
Recognized net actuarial loss		56			49			304
Net periodic pension cost	$	42		$	61		$	286

The Company incurred settlement losses of $95,000 and $704,000 during 2012 and 2011, respectively, for lump-sum distributions to plan participants. The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic pension cost during 2014 is $40,000.

The projected benefit payments under the Delaware Plan are as follows:

Fiscal year(s)	In thousands
2014	$	213
2015		209
2016		211
2017		205
2018		206
2019 - 2023		980

The assumptions used in the valuation of the Delaware Plan are as follows:

	Measurement Date
	September 28, 2013			September 29, 2012			October 1, 2011
Assumptions at year-end:
Discount rate		4.75	%		4.00	%		4.75	%
Rate of increase in compensation levels	N/A			N/A			N/A
Expected long-term rate of return on assets		8.00	%		8.00	%		8.00	%

The assumed discount rate is established as of the Company’s fiscal year-end measurement date. In establishing the discount rate, the Company reviews published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the plan. To develop the expected long-term rate of return on asset assumption, the Company considers the historical returns and the future expectations of returns for each asset class, as well as the target asset allocation of the Delaware Plan portfolio.

The fundamental goal underlying the investment policy for the Delaware Plan is to ensure that its assets are invested in a prudent manner to meet the obligations of the plan as such obligations come due. The primary investment objectives include providing a total return that will promote the goal of benefit security by attaining an appropriate ratio of plan assets to plan obligations, diversifying investments across and within asset classes, minimizing the impact of losses in single investments and adhering to investment practices that comply with applicable laws and regulations. The investment strategy for equities emphasizes U.S. large cap equities with the portfolio’s performance measured against the S&P 500 index or other applicable indices. The investment strategy for fixed income investments is focused on maintaining an overall portfolio with a minimum credit rating of A-1 as well as a minimum rating of any security at the time of purchase of Baa/BBB by Moody’s or Standard & Poor’s, if rated.

The Delaware Plan has a long-term target asset mix of 60% equities and 40% fixed income. The asset allocation for the Delaware Plan is as follows:

	Target Allocation			Percentage of Plan Assets at Measurement Date
	September 28, 2013			September 28, 2013			September 29, 2012			October 1, 2011
Large-cap equities		35.0	%		37.7	%		39.3	%		38.6	%
Mid-cap equities		8.0	%		8.1	%		8.9	%		9.1	%
Small-cap equities		9.0	%		8.5	%		5.6	%		6.1	%
International equities		8.0	%		7.5	%		5.9	%		6.0	%
Fixed income securities		40.0	%		36.1	%		37.2	%		39.3	%
Cash and cash equivalents		0.0	%		2.1	%		3.1	%		0.9	%

As of September 28, 2013, the Delaware Plan’s assets include equity securities, fixed income securities and cash and cash equivalents, and were required to be measured at fair value. The Company uses a three-tier hierarchy, which prioritizes the inputs used in measuring fair value, defined as follows: Level 1 - observable inputs such as quoted prices in active markets for identical assets and liabilities; Level 2 - inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 - unobservable inputs in which little or no market data exists, thereby requiring the development of valuation assumptions. The fair values of the Delaware Plan’s assets as of September 28, 2013 and September 29, 2012 are as follows:

(In thousands)	Total at September 28, 2013		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Large-cap equities	$	771	$	771	$	-	$	-
Mid-cap equities		165		165		-		-
Small-cap equities		174		174		-		-
International equities		153		153		-		-
Fixed income securities		739		739		-		-
Cash and cash equivalents		43		-		43		-
Total	$	2,045	$	2,002	$	43	$	-

(In thousands)	Total at September 29, 2012		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Large-cap equities	$	684	$	684	$	-	$	-
Mid-cap equities		155		155		-		-
Small-cap equities		98		98		-		-
International equities		103		103		-		-
Fixed income securities		646		646		-		-
Cash and cash equivalents		53		-		53		-
Total	$	1,739	$	1,686	$	53	$	-

Equity securities are primarily direct investments in the stock of publicly-traded companies that are valued based on the closing price reported in an active market on which the individual securities are traded. Fixed income securities are government and corporate debt securities that are valued based on the closing price reported in an active market on which the individual securities are traded. Cash and cash equivalents are money market funds that are valued based on the net asset value as determined by the fund each business day.

Supplemental employee retirement plan. The Company has Retirement Security Agreements (each, a “SERP”) with certain of its employees (each, a “Participant”). Under the SERPs, if the Participant remains in continuous service with the Company for a period of at least 30 years, the Company will pay to the Participant a supplemental retirement benefit for the 15-year period following the Participant’s retirement equal to 50% of the Participant’s highest average annual base salary for five consecutive years in the 10-year period preceding the Participant’s retirement. If the Participant retires prior to the later of age 65 or the completion of 30 years of continuous service with the Company, but has completed at least 10 years of continuous service with the Company, the amount of the supplemental retirement benefit will be reduced by 1/360th for each month short of 30 years that the Participant was employed by the Company. In 2005, the Company revised the SERPs to add Participants and increase benefits to existing Participants.

The reconciliation of the projected benefit obligation, plan assets, funded status of the plan and amounts recognized for the SERPs in the Company’s consolidated balance sheets is as follows:

	Year Ended
(In thousands)	September 28, 2013			September 29, 2012			October 1, 2011
Change in benefit obligation:
Benefit obligation at beginning of year	$	7,461		$	6,102		$	5,590
Service cost		242			217			176
Interest cost		287			301			282
Actuarial loss (gain)		(807	)		1,085			297
Distributions		(245	)		(244	)		(243	)
Benefit obligation at end of year	$	6,938		$	7,461		$	6,102
Change in plan assets:
Actual employer contributions	$	245		$	244		$	244
Actual distributions		(245	)		(244	)		(244	)
Plan assets at fair value at end of year	$	-		$	-		$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	(6,938	)	$	(7,461	)	$	(6,102	)
Net amount recognized	$	(6,938	)	$	(7,461	)	$	(6,102	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	1,380		$	2,324		$	1,330
Unrecognized prior service cost		-			227			454
Net amount recognized	$	1,380		$	2,551		$	1,784
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)	$	(807	)	$	1,085		$	297
Prior service costs		(227	)		(227	)		(227	)
Amortization of net loss		(136	)		(91	)		(34	)
Total recognized in other comprehensive income (loss)	$	(1,170	)	$	767		$	36

Net periodic pension cost for the SERPs includes the following components:

	Year Ended
(In thousands)	September 28, 2013		September 29, 2012		October 1, 2011
Service cost	$	242	$	217	$	176
Interest cost		287		301		282
Prior service cost		227		227		227
Amortization of net loss		136		91		34
Net periodic pension cost	$	892	$	836	$	719

The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic pension cost during 2014 is $60,000.   

The assumptions used in the valuation of the SERPs are as follows:

	Measurement Date
	September 28, 2013			September 29, 2012			October 1, 2011
Assumptions at year-end:
Discount rate		4.75	%		4.00	%		4.75	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%

The assumed discount rate is established as of the Company’s fiscal year-end measurement date. In establishing the discount rate, the Company reviews published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the plan. The SERPs expected rate of increase in compensation levels is based on the anticipated increases in annual compensation.

The projected benefit payments under the SERPs are as follows:

Fiscal year(s)	(In thousands)
2014	$	290
2015		290
2016		290
2017		290
2018		357
2019- 2023		1,846

As noted above, the SERPs were revised in 2005 to add Participants and increase benefits to certain existing Participants. However, for certain Participants the Company still maintains the benefits of the respective SERPs that were in effect prior to the 2005 changes, which entitles them to fixed cash benefits upon retirement at age 65, payable annually for 15 years. These SERPs are supported by life insurance policies on the Participants purchased and owned by the Company. The cash benefits paid under these SERPs were $28,000 in 2013, $62,000 in 2012 and $74,000 in 2011. The expense attributable to these SERPs was $15,000 in 2013, $15,000 in 2012 and $14,000 in 2011.

Retirement savings plan. In 1996, the Company adopted the Retirement Savings Plan of Insteel Industries, Inc. (“the Plan”) to provide retirement benefits and stock ownership for its employees. The Plan is an amendment and restatement of the Company’s Employee Stock Ownership Plan. As allowed under Sections 401(a) and 401(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary deductions for eligible employees.

During 2011 - 2013, employees were permitted to contribute up to 75% of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Code. The Plan allows for discretionary contributions to be made by the Company as determined by the Board of Directors. Such contributions to the Plan are allocated among eligible participants based on their compensation relative to the total compensation of all participants. During 2011 - 2013, the Company matched employee contributions up to 100% of the first 1% and 50% of the next 5% of eligible compensation that was contributed by employees. Company contributions to the Plan were $758,000 in 2013, $734,000 in 2012 and $604,000 in 2011.

Voluntary Employee Beneficiary Associations (“VEBA”). The Company has a VEBA under which both employees and the Company may make contributions to pay for medical costs. Company contributions to the VEBA were $3.6 million in 2013, $3.4 million in 2012 and $3.3 million in 2011. The Company is primarily self-insured for each employee’s healthcare costs, carrying stop-loss insurance coverage for individual claims in excess of $175,000 per benefit plan year. The Company’s self-insurance liabilities are based on the total estimated costs of claims filed and claims incurred but not reported, less amounts paid against such claims. Management reviews current and historical claims data in developing its estimates.